What needs to be realized is that our country will not see the kind of wealth we experienced over the past 50 years for at least another generation. There has been talk of American plutocracy and an aristocracy, and for good reason. As I’ve written before, if you didn’t cash in while the going was good, chances are you didn’t deserve to. With the economy on the verge of a double dip, it shows how further economic restructuring is necessary. This means a large removal of the quondam “middle class” into the lower body of society. The one-time “upper-middle class will become the upper class, eventually edging into the elite aristocracy (upwards of $250,000), or a much smaller middle class that will persevere as small business owners and entrepreneurs ($80-$100,000).

By extending the tax cuts, this new class structure will more easily emerge, and we will not be fooling ourselves. We will then be able to reform taxes in another few years, when the economy is on a better footing, and people are more sure of where they stand.

Some Fed workers worry that they can’t drive down asset rates from already super low levels – last week the 30 year mortgage rate dropped to 4.49%, its lowest since the 1950′s. With short term rates near zero, it’s harder to combat deflation than inflation, which can be fought with raised rates.

While infrastructure repair is needed, both for our country’s aging bridges and roads and the millions of out of work construction workers, it means more spending, which conservatives are wary of. Many are just concerned about reducing long term debt, and leaving the current problem to recover slowly. But Mr. Bernanke knows best.

In the 1990′s as a professor at Princeton, he advised Japan to set an inflation rate of 3 to 4%, which would mean that the cost of borrowing would fall. This is because interest rates were at zero, and the real cost of borrowing is rates minus inflation, which would theoretically spur demand. But since deflation hasn’t yet started, it’s not quite time for this.

For now, we’re still playing the waiting game.

Consumer spending is the real issue here. Since labor is a resource, it makes sense to want to preserve it, like we do oil. Moreover, exporting labor will drive up prices abroad, which is great when we’re all scared of deflation. As the Economist points out, a 20% rise in Chinese consumption would create 200,000 American jobs alone. In effect,for the world economy to recover, we need Chinese workers to be treated better, and spend more. For that to happen, a stable urban workforce is necessary, as are greater skills and investments in employees to become long term.  That means lower profits, but it also means a more prosperous China.

And don’t worry about cheap labor, India and Southeast Asia are still rife with workers.

The Financial Bill passed 60-39 and has been lauded by many as a responsible piece of legislation, and touted by others as imcomplete. Deregulation and laissez-faire economics have seen and done enough damage for the government to enact its first step towards economic socialism. I’m sure that phrasing made many of you shudder, but what else would you call it?

Republicans voted against the bill, obviously, but even Democrats are unsure as to whether the Bill will prevent future damages. The ability to invest in hedge funds, hold derivatives, and charge for debit interactions will change up front. The Financial Stability Oversight Council is a new department in charge of monitoring flashpoints in the economy, breaking up firms that pose a risk to the economy, and other regulatory procedures.

Republicans argue that this will prevent small and medium sized businesses from obtaining credit, and will force jobs overseas. To other more capitalistic countries? HA! The lack of attention to Freddie Mac and Fannie Mae is one of the larger issues that remains, as is the definition of “too big to fail,” but again, the bill is still up for review and is on the way to becoming complete, so Dems say.

Worries about the European markets caused the slide of last week, but today when details were released about the stress tests for Euro banks and a date was set for July 23rd, confidence about the stress tests soared.

Despite low German manufacturing numbers, which were said to be based on a technical correction, crude oil regained stature, to $74 a barrel.  Spanish banks gained mightily as their team reached their first World Cup today.

Treasury prices fell as investors sought riskier stocks and the Euro regained some of its earlier losses, back up to $1.2638.

Unemployment is still extraordinarily high, however, and there’s much dispute as to whether a second stimulus is going to do anything. It seems that now, most of the world is willing to spend the next couple of years in the financial doldrums in order to reduce a future deficit.  Americans, and Europeans, want a long term fix, and stimulus doesn’t seem to be the answer.

The unemployment rate dropped for June, to 9.5%, even though 125,000 jobs were lost. The reason is that the rate is defined by people who are out of work and looking for work. The decline in the civilian labor force demonstrates that people are not looking for work any more. What happens when they do, is the rate will climb up, unless there are available jobs, which there probably won’t be.

The International Institute of Finance (IIF, based in Washington) predicts that as mature economies end their stimulus packages at the beginning of next year, growth will decline. Forecasts for 2011 from around the world predict slight decreases in growth, which when backed by austerity measures, will continue for years.

When the Bush tax cuts expire on January 1, this will be good for the immediate repayment of our massive debt; but many are dissatisfied with higher taxes. The thing is, if growth lags, and the mini stimulus that failed for the third time in Congress this week doesn’t get passed, you can likely expect that double dip we’ve been hearing so much about.

So it seems as though Obama – gasp! – may be right about his economic policy, deferring payment for a few years until the economy has legs. But with his support still well under 50%, don’t hold your breath.

It all started in China, when a revised index scared investors around the globe that one of the economic powerhouses could slow. Then everyone remembered the European debt crisis, and by the time the bell rang in New York, the Dow was below 10,000. By the end of the day it was at 9870.30, down 268.22 points and 2.7%, its largest one day decline since June 4th.

All the big tech companies were down, Microsoft, Apple, and Amazon. Investors are unsure whether recovery will continue or we’re in for a double dip. Moving away from risk and volatility, bond markets surged, and the yield on Treasurys dropped below 3% for the first time since April 2009. Deflation remains a worry for many, as summer means slowing trade.

Many economists, including those in the Obama administration, are pushing for continued stimulus in order not to fall into a depression of low consumer spending and high unemployment rates. But European countries, already strapped, prefer just the opposite, following Germany’s austerity measures. Depression looks to be closer than everyone thought, as Bill Boehner, Speaker of the House hopeful, advocates a retirement age of 70, and major cuts in Social Security, which might not be a bad thing. Hopefully, it’s just the nervous nellies.

Private equity firms have billions of dollars to spend – and it’s time they did. Unused money, called in the industry, dry powder, is bad news for hedge funds. Typically these funds last 10 years and dry powder is invested within the first 3 to 5. Either the money must be invested or returned to clients. So big boom money that was given back in 2006 and 2007 is ready to be absorbed into the market – sending equity firms scrambling for deals.

Some firms are asking clients for more time, others are rushing into potential bargains. But there is great risk involved on those cheap companies, and it is uncertain as to whether it will pay off. A lot of money is being invested in foreign – Brazilian and Indian- companies. But with all the mounting pressure, it may be hard for firms to find consistent investments.

In the banking world, a new financial bill is making its way through Congress, allowing failing or near failing banks to wait a few years in hopes that they’re paid back for loans. Small banks and businesses are having trouble giving and receiving loans, so a $30 billion stimulus should help, the House hopes.  Pretending that these banks haven’t lost money may not be the best way to financial recovery, but at this point, it may be too early to tell.

Estonia joined the E.U. yesterday, becoming the 17th member. The small Baltic state will switch from the kroon to the Euro on Jan. 1 2011.. There remains mild concern over the sinking currency, as voiced by Dmitri Medvedev. Austerity measures are being enacted all around the Euro Zone – France will up their retirement age to – gasp! – 62! and Germany, watching Greece, Spain and Portugal, hesitates to to inject money into their market to increase spending.

At home, interest rates are still low, easing fears that the economy could double dip. BP agreed to a $20 billion fund to help Gulf Coast residents, and Obama was booed for his Oval Office address. He warned that stimulus procedures must continue in order to maintain recovery. With the G-20 conference in Toronto next week, Obama also wants Chinese consumers to continue buying, by allowing the remninbi to appreciate. Their export driven economy will likely keep the remnibi where it is, or inch it ever so higher, due to its recent strength against the decreasing Euro.

All in all, people aren’t really sure where we’re going. Stimulus measures must be continued, but the recession is becoming every day more a thing of the past. As Randy Frederick, director of trading for Charles Schwab put it, “None of the problems have been resolved. They have been sort of moved off the headline page.”

On Thursday the Dow was up almost three percent to 10,172. Foreign reports boosted markets as Australia had stronger than expected employment figures, New Zealand raised interest rates, Japan’s economy grew 1.2% in the first quarter, and the European Central Bank boosted its expectations for the European growth this year. China also boasted a $19.5 billion trade surplus in May. Although some remain confident that an economic slowdown for China is inevitable, at present, numbers don’t lie.

Here, weekly unemployment benefit rolls fell by more than a quarter of a million to about 4.5 million, the lowest since December of 2008. While this number is continuing to improve, it is ever so slight. Unemployment is one of the most crucial aspects to an economy because it indicates general consumer confidence and the overall rate remains above 9%.

Ben Bernanke said that if markets hold, the U.S can expect 3.5% growth this year.

BP’s stock increased more than 10% yesterday, amid rising tensions between Britons and the American government, which were muted by the leaders of both nations. BP remains an important asset to the British economy, last year paying $1.4 billion in taxes.  With a revised estimate of the oil leaking daily from 20,000 to 40,000 barrels, the U.S. government requested that BP pay the salaries of U.S. workers idled from the embargo on deepwater drilling. BP may have to cut dividends this quarter.